October 1, 2008

Bid for Power Price Inquiry

by ssavage

By WATKINS, Tracy

SOARING power price rises are to be put under the spotlight, but scepticism has greeted suggestions of a Government inquiry.

Commerce and energy ministers Lianne Dalziel and David Parker hit out at "alarming" rises of up to 12 per cent in Wellington and parts of the South Island, and said they would seek Cabinet approval for an inquiry.

But National's energy spokesman, Gerry Brownlee, said the promise of an inquiry was too little, too late, after a 48 per cent rise in domestic power prices in the past five years.

"Suddenly, on the eve of an election, they announce a review . . . After nine long years and regular complaints about the state of transmission and generation, they are trying to pretend they will do something about it."

Mr Brownlee questioned whether a review would carry any more clout than the recent inquiry into petrol prices, which found no evidence of anti-competitive behaviour among petrol companies.

Two government agencies -- the Commerce Commission and the Electricity Commission -- are charged with monitoring electricity prices to detect anti- competitive practices.

The Commerce Commission has been investigating competition among power companies since 2005. It said yesterday that it was a large- scale investigation and a date for completion was not available.

The Government has previously imposed regulations on prices charged by electricity lines companies and Transpower, which make up about 40 per cent of an electricity bill, and forced retailers to offer a low fixed daily charge for low users.

But as recently as last year, Mr Parker was defending New Zealand energy prices, which he said were below the average in the Organisation for Economic Cooperation and Development.

Mr Parker said yesterday that power companies had given assurances a year ago that no more significant price rises were in the pipeline.

"Yet here is another major increase. This further amplifies the gap between residential and industrial tariffs in a way we find difficult to comprehend."

He was concerned that Contact Energy had put up South Island power prices because it faced no real competition. "If so, that is an unacceptable situation."

Ministers would ask the Cabinet to consider whether a broader inquiry was needed into whether the price increases were evidence of a lack of competition being used to "ratchet up prices".

Contact says the price rise reflects increased transmission risk and came after years of under- investment in the national power grid.